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Despite the notable success in enrolling children in primary school over the past decade, the education agenda is unfinished as millions of children are still excluded from learning opportunities and millions more leave school without having acquired the essential knowledge and skills needed to participate in society.

On January 27, the Center for Universal Education at Brookings hosted a half-day conference that focused on the research examining “what works in education” to achieve improved learning opportunities and outcomes. In addition to hearing from researchers studying the effectiveness of various education strategies, participants discussed how to facilitate a future research agenda that could have the most meaningful impact on learning. Senior Fellow Jacques van der Gaag moderated the discussion.

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Transcript

• Improving Education in the Developing World: Evidence from Randomized Evaluations Presentation (.pdf)
• Sociocultural Gradients for Language Scores by Country Slide (.pdf)
• School Resources and Educational Outcomes in Developing Countries Presentation (.pdf)
• Making Learning for All a Reality Presentation (.pdf)
• Addressing the Global Learning Crisis Presentation (.pdf)

Event Materials

• 0127_improving_education_in_developing_world
• 0127_slide_vandergaag
• 0127_edinptoh
• 0127_king
• 0127_wagner

       

       

       

       

Introduction

Ohio has already taken important steps to address the state’s ongoing foreclosure crisis, yet the crisis continues, causing distress for thousands of families and individuals, and destabilizing cities, towns and neighborhoods across the state. Therefore, the state, its local governments and private stakeholders need to do still more to deal more effectively with the crisis and its impacts on the state’s housing stock, cities and neighborhoods.

What is often termed the “foreclosure crisis” is actually a multi-dimensional crisis, in which the collapse of the housing bubble, the devastation caused by the lax and often irresponsible credit practices that accompanied and perpetuated that bubble, the resulting freeze on commercial and consumer credit, and the worldwide recession are interwoven, and can only with great difficulty be untangled. In Ohio, those forces are further exacerbated by profound changes to the state’s historical economic underpinnings. Ohio cannot solve the crisis by itself, but it can significantly mitigate its impact on people, neighborhoods, and towns and cities. These mitigating efforts will also help preserve the value of homes and neighborhoods in the state, and place Ohio in a stronger position to benefit from the future economic recovery.

The paper begins with a short summary of current conditions and the actions the state has already taken to address the wave of foreclosures, followed by a discussion of areas for future action. This discussion will address mitigating both the individual and community impacts of foreclosure, but will give particular emphasis to the critical issue of softening the blow of foreclosure on communities, which up to now has been less of a focus for state action.

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Editor’s Note: This blog post is part of a series on the 2015 Financial and Digital Inclusion Project (FDIP) Report and Scorecard, which were launched at a Brookings public event on August 26. Previous posts have highlighted five key findings from the 2015 FDIP Report and explored groundbreaking financial inclusion developments in India. Today’s post will compare financial inclusion outcomes and opportunities for growth across several Asian countries included in the 2015 Report and Scorecard.

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Of the 21 countries ranked in the 2015 Financial and Digital Inclusion Project (FDIP) Report and Scorecard, no countries in Asia placed in the top 5 in the overall ranking. However, all of the FDIP Asian countries have demonstrated progress within at least one of the four dimensions of the 2015 Scorecard: country commitment, mobile capacity, regulatory environment, and adoption of traditional and digital financial services.

This blog post will dive into a few of the obstacles and opportunities facing FDIP countries in central Asia, the Middle East, and southeast Asia as they move toward greater access to and usage of financial services among marginalized groups. We explore these countries in order of their overall score: Turkey (74 percent), Indonesia (70 percent), the Philippines (68 percent), Bangladesh (67 percent), Pakistan (65 percent), and Afghanistan (58 percent). You can also read our separate post on financial inclusion in India, available here.

Turkey: Clear economic advantages, but opportunities for enabling regulation and greater equity remain

Turkey is one of the few upper-middle income countries in the FDIP sample, ranking in the top 5 in terms of gross domestic product (GDP) measured in US dollars. Turkey’s fairly robust banking infrastructure contributed to its relatively strong adoption rates: As of 2013, the International Monetary Fund’s Financial Access Survey found that Turkey had about 20 bank branches per 100,000 adults (the 4^th highest density rate among the 21 FDIP countries) and about 73 ATMs per 100,000 adults (the 2^nd highest density rate among the FDIP countries).

According to the World Bank’s Global Financial Inclusion (Global Findex) database, about 57 percent of adults in Turkey had an account with a mobile money provider or formal financial institution as of 2014. Turkey’s performance on the adoption dimension of the 2015 Scorecard contributed to its tie with Colombia and Chile for 6^th place on the overall scorecard.

With that said, Turkey received lower mobile capacity and regulatory environment scores, ranking 16^th and 17^th respectively. Although Turkey’s smartphone and mobile penetration levels are quite robust, a limited mobile money provider landscape, combined with a lack of regulatory clarity surrounding branchless banking regulations (particularly agent banking), constrained Turkey’s scores in those categories.

Nonetheless, there is promising news for Turkey’s financial inclusion environment. In 2015, Turkey assumed the G20 presidency and has renewed its focus on financial inclusion in association with this transition. Turkey’s 2014 financial inclusion strategy is one example of the country’s commitment to advancing inclusion.

To date, financial inclusion growth in Turkey has been limited, as evidenced by the results of the 2011 and 2014 Global Findex. However, if the country’s stated commitment translates into concrete initiatives moving forward, we can expect to see accelerated financial inclusion growth. This will be critical for facilitating access to and usage of quality financial services among the nearly 60 percent of women in Turkey without formal financial accounts. Reducing the approximately 25 percentage point gap in account ownership between men and women — one of the highest gender gaps among the 21 FDIP countries — should be a key priority for the country moving forward.

Indonesia: High mobile money potential, but enhanced awareness needed to drive adoption

Recent changes to Indonesia’s regulatory environment have facilitated a more enabling digital financial services ecosystem, although there is still room for improvement in terms of reducing supply-side barriers. Increasing mobile money awareness could help leverage Indonesia’s strong mobile capacity rates to increase access to and usage of formal financial services. However, moving from a heavily cash-based environment to greater use of digital financial services will take time: A 2014 InterMedia survey in Indonesia found that although 93 percent of bank account holders could access their accounts digitally, 73 percent preferred to access their accounts via an agent at a bank branch.

The differing mandates of Indonesia’s new financial services authority, Otoritas Jasa Keuangan (OJK), which focuses on branchless banking (specifically agent banking) and Bank Indonesia, which focuses on electronic money regulation, may have created some confusion regarding the regulatory environment. Solidifying the country’s financial inclusion strategy and clarifying the roles of the various financial inclusion stakeholders could provide opportunities for greater coherence in terms of financial inclusion objectives.

OJK’s recent branchless banking regulations have led to several positive changes within the regulatory environment. For example, these regulations enabled financial service providers to appoint individuals and business entities as agents and to provide simplified customer due diligence requirements. The 2015 FDIP Report highlights in greater detail some possible improvements to the branchless banking and e-money regulations.

On the mobile capacity side, Indonesia tied for the second-highest score on the 2015 Scorecard. Indonesia is one of the few countries where mobile money platform interoperability has been implemented, allowing different mobile money services to “talk” to one another in real time. Indonesia also boasted the third-highest 3G network coverage by population among all the FDIP Asian countries, as well as the third-highest unique subscribership rate among these countries. However, only about 3 percent of adults were aware of mobile money as of fall 2014, according to the InterMedia survey.

In terms of adoption, the 2014 Global Findex found that women in Indonesia actually had slightly higher rates of account ownership than adults in general, although there is still significant room for growth across all adoption indicators. Given Indonesia’s strong mobile capacity ranking, increasing awareness of mobile money services could drive growth in the digital finance sector. Clarifying existing regulatory frameworks and removing some remaining restrictions regarding agent exclusivity and other agent criteria could further boost financial inclusion.

Philippines: Strong commitment, but geographic barriers have inhibited scale

The Philippines tied with Bangladesh to garner 15^th place for adoption, which contributed to the country’s overall ranking (also 15^th place). In both Bangladesh and the Philippines, about 31 percent of adults had an account with a mobile money provider or formal financial institution as of 2014. According to the 2014 Global Findex, the percentage of women with formal financial accounts was about 7 percentage points higher than the overall percentage of adults with accounts — a rarity among the 21 FDIP countries, which generally exhibit a “gender gap” in which women are less likely to have formal financial accounts than men.

The Philippines’ efforts to foster financial inclusion earned it the second-highest country commitment and regulatory environment rankings among the FDIP Asian countries. The Bangko Sentral ng Pilipinas (BSP), the Philippines’ central bank, has issued a number of circulars providing guidance regarding electronic money and allowing non-bank institutions to become e-money issuers. The BSP also has the distinction of being the first central bank in the world to create an office dedicated to financial inclusion. Most recently, the BSP launched a national financial inclusion strategy in July 2015.

On the mobile side, according to the GSMA Intelligence database, as of the end of the first quarter of 2015 the Philippines had the highest unique mobile subscribership rate among the FDIP Asian countries, as well as the second-highest rate of 3G network coverage by population among these countries.

In terms of mobile money, the Philippines is home to two of the earliest mobile financial services products, Smart’s Smart Money and Globe’s GCash. It also boasts the second-highest rate of mobile money accounts among adults in all the FDIP Asian countries, according to the 2014 Global Findex.

There is still significant room for improvement in adoption of traditional and digital financial services in the Philippines. The country’s geography has posed a challenge with respect to advancing access to financial services among the dispersed population. While the extent of banking infrastructure has improved over time, as of 2013 610 out of 1,634 cities and municipalities did not have a banking office, and financial access points remained concentrated in larger cities. Expanding agent locations and facilitating interoperability could enhance mobile money adoption, mitigating the consequences of these geographic barriers.  

Bangladesh: Rapid growth, but high unregistered use and low adoption overall

While Bangladesh performed strongly on the country commitment and mobile capacity dimensions of the 2015 FDIP Scorecard, it received one of the lowest adoption rankings among the FDIP Asian countries. According to the Global Findex, about 31 percent of adults age 15 and older had an account with a formal financial institution or mobile money provider as of 2014. Indicators pertaining to the country’s rates of formal saving, credit card use, and debit card use all received the lowest score.

Bangladesh has a robust mobile landscape, with fairly strong unique mobile subscription rates — as of the first quarter of 2015, it was tied with Indonesia for the third-highest unique mobile subscribership rates among the FDIP Asian countries, after the Philippines and Turkey. This mobile coverage is combined with a multiplicity of mobile money providers (although a 2014 InterMedia survey noted that nearly 90 percent of active mobile money customers used the bKash mobile money service).

Awareness of mobile money as a service in Bangladesh is very high, although understanding of the concept is less prevalent — in 2014, about 91 percent of respondents in an InterMedia survey were aware of at least one mobile money provider, although only about 36 percent were aware of mobile money as a general concept.

Unregistered use of mobile money accounts is high. While about 37 percent of adults had a mobile money account or bank account or both as of 2014, according to the InterMedia survey, only about 5 percent had registered mobile money accounts, while 4 percent had active, registered mobile money accounts (meaning an account that is registered and has been used in the previous 90 days).Transitioning to registered accounts will help enable individuals to connect with more extensive financial services, such as receipt of government payments.

Overall, adoption of mobile money and the expansion of agent locations have been increasingly rapid in Bangladesh — as of 2014 Bangladesh was one of the fastest growing markets in terms of total accounts globally. Over 60 percent of respondents in a 2013 InterMedia survey stated that they “fully” or “rather” trusted mobile money. Moving forward, increasing financial capability might help individuals feel more at ease registering their accounts and using them independently of an agent.

Pakistan: Public and private sector initiatives advance inclusion

Pakistan ranked 7^th in terms of the percentage of adults with mobile money accounts among the 21 countries, achieving the highest percentage of all of the Asian FDIP countries. Yet there is significant room for growth — as of 2014, only about 6 percent of adults had a mobile money account.

The State Bank of Pakistan (SBP) has clearly expressed its commitment to advancing financial inclusion, which earned the country a commitment score of 100 percent. The SBP developed Branchless Banking regulations in 2008, with revisions in 2011. These regulations were explicitly intended to promote financial inclusion. More recently, the country’s National Financial Inclusion Strategy was launched in May 2015. In terms of quantitative assessments of financial inclusion, the SBP tracks supply-side information on branchless banking in its quarterly newsletters.

Recent public and private sector initiatives may help advance mobile money adoption. For example, a re-verification initiative for SIM cards was mandated by the government and initiated earlier in 2015. Mobile network operators have been promoting registration of mobile money accounts since the biometric re-verification process is more intensive than the identification requirements needed to register a mobile money account.

Earlier, in September 2014, the EasyPaisa mobile money service decided to eliminate fees related to money transfers between Easypaisa account customers and cash-out transactions for a set period. As of April 2015, the number of person-to-person money transfers had increased by about 2500 percent.

Still, barriers to financial inclusion remain. A 2014 InterMedia survey noted that while distance was less of a barrier to registration than previously, distance did affect the frequency with which users engaged with mobile money services. Therefore, expanding access points could further facilitate use of mobile money. Increasing the number of registered accounts could also provide individuals with more opportunities to engage with financial services beyond basic transfers — the InterMedia survey found that as of 2014, about 8 percent of adults were over-the-counter mobile money users, while 0.3 percent were registered users.

Afghanistan: Commitment to improving infrastructure and adoption

Instability and systemic corruption in Afghanistan over the past several decades have damaged trust in formal financial services and limited the development of traditional banking infrastructure. In addition to having one of the lowest levels of GDP among the 21 FDIP countries, as of 2013 the Financial Access Survey found Afghanistan had the lowest reported density of commercial banks per 100,000 adults. Even among individuals who can access banks, adoption of formal accounts is constrained by a lack of trust in formal financial services.

On the mobile side, Afghanistan has fairly widespread 3G network coverage (over 80 percent of the population, according to the GSMA Intelligence database), which helped boost its mobile capacity ranking to 2^nd place. However, Afghanistan received the lowest score possible for each of the 15 adoption indicators. According to the 2014 Global Findex, financial account ownership as of 2014 was at about 10 percent of adults, and financial account ownership among women was at only 4 percent. Tracking gender-disaggregated data at the national level could help the government better identify underserved populations and target financial solutions toward their needs.

The government has made an effort to promote financial inclusion and digital financial services. For example, Da Afghanistan Bank committed to the Alliance for Financial Inclusion in 2009, and the Republic of Afghanistan is a member of the Better Than Cash Alliance. In 2008, the Money Service Providers Regulation was issued, with amendments instituted a few years later pertaining to e-money. The Afghanistan Payments Systems, which is still being fully operationalized, aims to allow payment service providers such as mobile network operators to connect their mobile money systems.

While several mobile money options are available, adoption of these services is low. According to the 2014 Global Findex, about 0.3 percent of adults had a mobile money account. Implementing interoperability across platforms might help increase the utility of mobile money services for consumers, and as in Turkey, developing specific agent banking regulations could provide clarity to the sector and drive innovation.

By expanding financial access points, educating consumers about traditional and digital financial services, and monitoring providers to ensure consumer protection, Afghanistan’s regulatory entities and financial service providers may be able to better reach underserved populations and inculcate trust in formal financial services.

       

       

While antibiotics are necessary and crucial for treating bacterial infections, their misuse over time has contributed to a rather alarming rate of antibiotic resistance, including the development of multidrug-resistance bacteria or “super bugs.” Misuse manifests throughout all corners of public and private life; from the doctor’s office when prescribed to treat viruses; to industrial agriculture, where they are used in abundance to prevent disease in livestock. New data from the World Health Organization (WHO) and U.S. Centers for Disease Control and Prevention (CDC) confirm that rising overuse of antibiotics has already become a major public health threat worldwide.

As drug resistance increases, we will see a number of dangerous and far-reaching consequences. First, common infections like STDs, pneumonia, and “staph” infections will become increasingly difficult to treat, and in extreme cases these infections may require hospitalization or treatment with expensive and toxic second-line therapies. In fact, recent estimates suggest that every year more than 23,000 people die due to drug-resistant infections in the U.S., and many more suffer from complications caused by resistant pathogens. Further, infections will be harder to control. Health care providers are increasingly encountering highly resistant infections not only in hospitals – where such infections can easily spread between vulnerable patients – but also in outpatient care settings.

Fundamental Approaches to Slowing Resistance

Incentivize appropriate use of antibiotics. Many patients and providers underestimate the risks of using antibiotics when they are not warranted, in part because these drugs often have rapid beneficial effects for those who truly need them.  In many parts of the world the perception that antibiotics carry few risks has been bolstered by their low costs and availability without a prescription or contact with a trained health care provider. Education efforts, stewardship programs, and the development of new clinical guidelines have shown some success in limiting antibiotic use, but these fixes are limited in scope and generally not perceived as cost-effective or sustainable. Broader efforts to incentivize appropriate use, coupled with economic incentives, may be more effective in changing the culture of antibiotic use. These options might include physician or hospital report cards that help impact patient provider selection, or bonuses based on standardized performance measures that can be used to report on success of promoting appropriate use.  While these might create additional costs, they would likely help control rates of drug resistant infections and outweigh the costs of treating them.

Reinvigorate the drug development pipeline with novel antibiotics. There has not been a new class of antibiotics discovered in almost three decades, and companies have largely left the infectious disease space for more stable and lucrative product lines, such as cancer and chronic disease. Antibiotics have historically been inexpensive and are typically used only for short periods of time, creating limited opportunities for return on investment. In addition, unlike cancer or heart disease treatments, antibiotics lose effectiveness over time, making them unattractive for investment. Once they are on the market, the push to limit use of certain antibiotics to the most severe infections can further constrict an already weak market.

Late last year, H.R. 3742, the Antibiotic Development to Advance Patient Treatment (ADAPT) Act of 2013, was introduced and referred to the House Energy and Commerce Subcommittee on Health. If enacted, the ADAPT Act would create a streamlined development pathway to expedite the approval of antibiotics that treat limited patient populations with serious unmet medical needs. This could potentially reduce costs and development time for companies, thereby encouraging investment in this space. Regulators have indicated that they would also welcome the opportunity to evaluate benefits and risk for a more selective patient subpopulation if they could be confident the product would be used appropriately. The bill has received a great deal of support and would help address a critical public health need (I cover this topic in more detail with my colleagues Kevin Outterson, John Powers, and Mark McClellan in a recent Health Affairs paper).

Advance new economic incentives to remedy market failure. Innovative changes to pharmaceutical regulation, research and development (R&D), and reimbursement are necessary to alleviate the market failure for antibacterial drugs. A major challenge, particularly within a fee-for-service or volume-based reimbursement system, is providing economic incentives that promote investment in drug development without encouraging overuse.  A number of public and private stakeholders, including the Engelberg Center for Health Care Reform and Chatham House’s Centre on Global Health Security Working Group on Antimicrobial Resistance, are exploring alternative reimbursement mechanisms that  “de-link” revenue from the volume of antibiotics sold. Such a mechanism, combined with further measures to stimulate innovation, could create a stable incentive structure to support R&D.

Improve tracking and monitoring of resistance in the outpatient setting. There is increasing concern about much less rigorous surveillance capabilities in the outpatient setting, where drug-resistant infections are also on the rise. Policymakers should consider new incentives for providers and insurers to encourage a coordinated approach for tracking inpatient and outpatient resistance data. The ADAPT Act, mentioned above, also seeks to enhance monitoring of antibiotic utilization and resistance patterns. Health insurance companies can leverage resistance-related data linked to health care claims, while providers can capture lab results in electronic health records. Ultimately, this data could be linked to health and economic outcomes at the state, federal, and international levels, and provide a more comprehensive population-based understanding of the impact and spread of resistance. Current examples include the Food and Drug Administration’s (FDA) Sentinel Initiative and the Patient-Centered Outcomes Research Institute’s PCORnet initiative. 

Antibiotic resistance is an urgent and persistent threat. As such, patients and providers will continue to require new antibiotics as older drugs are forced into retirement by resistant pathogens. Stewardship efforts will remain critical in the absence of game-changing therapies that parry resistance mechanisms. Lastly, a coordinated surveillance approach that involves diverse stakeholder groups is needed to understand the health and economic consequences of drug resistance, and to inform antibiotic development and stewardship efforts.

Editor's note: This blog was originally posted in May 2014 on Brookings UpFront.

      

While antibiotics are necessary and crucial for treating bacterial infections, their misuse over time has contributed to a rather alarming rate of antibiotic resistance, including the development of multidrug-resistance bacteria or “super bugs.” Misuse manifests throughout all corners of public and private life; from the doctor’s office when prescribed to treat viruses; to industrial agriculture, where they are used in abundance to prevent disease in livestock. New data from the World Health Organization (WHO) and U.S. Centers for Disease Control and Prevention (CDC) confirm that rising overuse of antibiotics has already become a major public health threat worldwide.

As drug resistance increases, we will see a number of dangerous and far-reaching consequences. First, common infections like STDs, pneumonia, and “staph” infections will become increasingly difficult to treat, and in extreme cases these infections may require hospitalization or treatment with expensive and toxic second-line therapies. In fact, recent estimates suggest that every year more than 23,000 people die due to drug-resistant infections in the U.S., and many more suffer from complications caused by resistant pathogens. Further, infections will be harder to control. Health care providers are increasingly encountering highly resistant infections not only in hospitals – where such infections can easily spread between vulnerable patients – but also in outpatient care settings.

Fundamental Approaches to Slowing Resistance

Incentivize appropriate use of antibiotics. Many patients and providers underestimate the risks of using antibiotics when they are not warranted, in part because these drugs often have rapid beneficial effects for those who truly need them.  In many parts of the world the perception that antibiotics carry few risks has been bolstered by their low costs and availability without a prescription or contact with a trained health care provider. Education efforts, stewardship programs, and the development of new clinical guidelines have shown some success in limiting antibiotic use, but these fixes are limited in scope and generally not perceived as cost-effective or sustainable. Broader efforts to incentivize appropriate use, coupled with economic incentives, may be more effective in changing the culture of antibiotic use. These options might include physician or hospital report cards that help impact patient provider selection, or bonuses based on standardized performance measures that can be used to report on success of promoting appropriate use.  While these might create additional costs, they would likely help control rates of drug resistant infections and outweigh the costs of treating them.

Reinvigorate the drug development pipeline with novel antibiotics. There has not been a new class of antibiotics discovered in almost three decades, and companies have largely left the infectious disease space for more stable and lucrative product lines, such as cancer and chronic disease. Antibiotics have historically been inexpensive and are typically used only for short periods of time, creating limited opportunities for return on investment. In addition, unlike cancer or heart disease treatments, antibiotics lose effectiveness over time, making them unattractive for investment. Once they are on the market, the push to limit use of certain antibiotics to the most severe infections can further constrict an already weak market.

Late last year, H.R. 3742, the Antibiotic Development to Advance Patient Treatment (ADAPT) Act of 2013, was introduced and referred to the House Energy and Commerce Subcommittee on Health. If enacted, the ADAPT Act would create a streamlined development pathway to expedite the approval of antibiotics that treat limited patient populations with serious unmet medical needs. This could potentially reduce costs and development time for companies, thereby encouraging investment in this space. Regulators have indicated that they would also welcome the opportunity to evaluate benefits and risk for a more selective patient subpopulation if they could be confident the product would be used appropriately. The bill has received a great deal of support and would help address a critical public health need (I cover this topic in more detail with my colleagues Kevin Outterson, John Powers, and Mark McClellan in a recent Health Affairs paper).

Advance new economic incentives to remedy market failure. Innovative changes to pharmaceutical regulation, research and development (R&D), and reimbursement are necessary to alleviate the market failure for antibacterial drugs. A major challenge, particularly within a fee-for-service or volume-based reimbursement system, is providing economic incentives that promote investment in drug development without encouraging overuse.  A number of public and private stakeholders, including the Engelberg Center for Health Care Reform and Chatham House’s Centre on Global Health Security Working Group on Antimicrobial Resistance, are exploring alternative reimbursement mechanisms that  “de-link” revenue from the volume of antibiotics sold. Such a mechanism, combined with further measures to stimulate innovation, could create a stable incentive structure to support R&D.

Improve tracking and monitoring of resistance in the outpatient setting. There is increasing concern about much less rigorous surveillance capabilities in the outpatient setting, where drug-resistant infections are also on the rise. Policymakers should consider new incentives for providers and insurers to encourage a coordinated approach for tracking inpatient and outpatient resistance data. The ADAPT Act, mentioned above, also seeks to enhance monitoring of antibiotic utilization and resistance patterns. Health insurance companies can leverage resistance-related data linked to health care claims, while providers can capture lab results in electronic health records. Ultimately, this data could be linked to health and economic outcomes at the state, federal, and international levels, and provide a more comprehensive population-based understanding of the impact and spread of resistance. Current examples include the Food and Drug Administration’s (FDA) Sentinel Initiative and the Patient-Centered Outcomes Research Institute’s PCORnet initiative. 

Antibiotic resistance is an urgent and persistent threat. As such, patients and providers will continue to require new antibiotics as older drugs are forced into retirement by resistant pathogens. Stewardship efforts will remain critical in the absence of game-changing therapies that parry resistance mechanisms. Lastly, a coordinated surveillance approach that involves diverse stakeholder groups is needed to understand the health and economic consequences of drug resistance, and to inform antibiotic development and stewardship efforts.

Editor's note: This blog was originally posted in May 2014 on Brookings UpFront.

       

Policy Brief #179

During an "exit interview" with the Wall Street Journal, departing National Economic Council Director Lawrence Summers argued that history would judge the United States based on how well we adjust to China’s emergence as a great power, economically and politically. In the face of China’s progress, America’s manufacturing sector faces major challenges in becoming and remaining competitive and our choice of national economic policies will affect how well we meet those challenges. It is essential that the U.S. trade deficit not balloon as the economy recovers. There is scope to expand our exports in services and agriculture, but improving the competitiveness of U.S. manufacturing is vital.

The U.S. Trade Deficit: Background

Components of the Trade Deficit. The U.S. trade deficit in goods and services was just under $700 billion in 2008—4.9 percent of Gross Domestic Product (GDP). However, the deficit in goods trade was nearly $835 billion, which was partially offset by a $136 billion surplus in services trade. The latter surplus has grown consistently over a range of service types and has important potential to expand. Going forward, we can assume this surplus will remain around one percent of GDP. But services trade surpluses alone cannot solve the U.S. trade deficit problem, because of persistent large deficits in goods trade.

Very important are deficits in the energy sector. In 2008, petroleum products accounted for $386 billion of the total trade deficit (2.7 percent of GDP). reducing energy imports (and consumption) is a significant challenge for the U.S. economy, and with global energy demand continuing to rise and supply constrained, oil prices are more likely to rise than fall. The U.S. bill for imported oil is unlikely to fall below 2.7 percent of GDP for years to come.

In future, for overall U.S. trade in goods and services to be balanced, non-energy products (that is, manufactured and agricultural products) would have to achieve a surplus of around 1.7 percent of GDP. Added to the one percent services surplus, the two would balance out the almost unavoidable petroleum deficit.

Obviously, elements in this rough calculation could shift, for better or worse, but if the U.S. economy is to achieve a more balanced growth path, the competitive position of U.S. manufacturing must improve sharply.

Growth of the U.S. Trade Deficit. In 1999, the U.S. economy was experiencing strong growth and low inflation, but the trade deficit in manufactured and agricultural products was high—$262.5 billion—and concentrated in four broad industry categories. The largest deficit was in plastic, wood and paper products ($62 billion). Transportation equipment—from autos to aerospace—was close behind ($61 billion), followed by textiles and apparel ($52 billion) and computers and electronics ($44 billion). Only two categories had trade surpluses: chemicals at more than $9 billion and agriculture at $4 billion.

By 2008, the trade deficit had risen to $400 billion, an increase of $138 billion or nearly 52 percent in nominal terms. The deficit in computers and electronics accounted for nearly half of the overall increase in the trade deficit (48 percent, a $66 billion increase). Two other industries had large deficit increases: plastic, wood and paper products; and textiles and apparel. By contrast, agricultural products contributed an additional $27 billion to a small 1999 surplus. And transportation equipment reduced its trade deficit by nearly $12 billion. Chart 1 illustrates how the increase in the U.S. goods trade deficit (excluding oil) was distributed by segment between 1999 and 2008.

Rising Imports from China

Simply put, the United States runs chronic trade deficits and China runs trade surpluses because we spend more than we produce, and they do the opposite. The U.S. trade deficit with China in manufactured and agricultural products was already large in 1999—$68.6 billion or 26 percent of the nation’s total trade deficit. By 2008, it had increased to nearly $268 billion. The story of the increasing U.S. trade deficit from 1999-2008—apart from oil—is the explosion in the deficit with China.

Computers and electronic products account for much of the increase in U.S. imports from China. In 2008, China exported $108 billion in these products to the United States, up from less than $19 billion in 1999. Beyond this sector, Chinese exports to the United States have grown strongly pretty much across the board. Although the United States exports agricultural products to China, there is a large return flow of processed and labor-intensive food products. And, while Chinese textile and apparel imports have risen, U.S. demand for Chinese goods in this category has grown only modestly as other emerging economies have become major clothing exporters.

The Nature of Chinese Exports. On a visit to China early in 2010, I heard a memorable speech declaring that the United States is exploiting China. The Chinese perception is based on where profits land. For example, a 2009 survey by Greg Linden, Kenneth Kraemer and Jason Dedrick of the University of California suggests that Apple, Inc. sells iPhones or iPods for several hundred dollars, most of them “made in China,” but the Chinese producer and Chinese workers receive just under four dollars apiece. The retail price of the 2005 video iPod was $299, the wholesale price $224 and the factory price $144.56. The largest part of the factory price ($101.40) came from Japanese components, with U.S. companies other than Apple supplying $14.14 in components and many different suppliers providing other small components. The final assembly and checking is done in China for $3.86, while Apple’s estimated gross margin is $80 per unit sold at wholesale, plus a portion of the retail margin through its Apple online and retail stores.

These same researchers deconstructed the value of a 2005 Hewlett-Packard Notebook PC, which sold at retail for $1,399 and had a factory cost of $856.33. Intel and Microsoft received a total of $305.43 for each computer sold, while the assembly and checking done in China netted $23.76— only 1.7 percent of the retail price. China’s massive export boom in computers and electronics derives from the fact that it is a very good place to assemble electronic products that clearly benefit U.S. companies’ profits. However, China’s policymakers want change; they are determined to attempt to obtain more of the value added of the goods their citizens assemble.

The place of China as a supplier to the United States is further illuminated in the forthcoming book Rising Tide: Is Growth in Emerging Economies Good for the United States? by Lawrence Edwards and Robert Lawrence, who have taken a detailed look at the “unit values” of traded products, particularly U.S. exports and imports. Detailed trade data identify specific classes of products and provide total dollar value and number of physical items sold in each class. For example, the data report the value of electric motors exported by China to the United States, along with the number of motors, which allows a calculation of the price per motor. If a country is selling motors for electric shavers or toys, the unit value will be small; if the motors are for large capital goods, the unit value will be high.

Edwards and Lawrence find a striking result for China, one that also applies to other emerging economies. It turns out that unit values in the same product categories are hugely different. China sells low unit value products to the United States, and the United States sells high unit value products around the world. These price differentials are so great, in fact, they suggest the United States and China are not really competing. They are making completely different things. Perhaps even more surprising, over the past several years, there appears to be no tendency for the unit values to converge. This contradicts the hypothesis that China is successfully moving up the technology or “value ladder.” Instead, U.S. competitors are Europe and Japan.

Although the volume of Chinese exports to the United States has soared, in high-tech, as we saw, it is assembling components originating elsewhere and, in other industries, it is making primarily low value products, such as toys and children’s clothing— market niches where the U.S. would not be expected to be competitive.

China and Multinational Companies

When China emerged from the Cultural Revolution and started on a path to become a productive and market-oriented economy, it faced massive educational, technological and business hurdles. Competent scientists, engineers and managers had been exiled and “re-educated.” Heroic efforts were needed to catch up to developed nations’ economies. Asian precursors such as Japan and Korea had faced their own catch-up challenges, taking advantage of the global market in capital goods to help them, and China followed their lead. Unlike the others, China encouraged direct foreign investments and required partnerships with domestic businesses. These relationships provided not only financing, but also the business and technology skills of global corporations and sped development of Chinese companies.

Germany provides a fascinating case study of the benefits and perils of a strong relationship with China. Spiegel Online notes that the most important driving force behind the current German economic upswing is its exports of sophisticated capital goods to China. German companies find, however, that the Chinese demand access to their industrial know-how. German businesses are reluctant to offend their Chinese customers, but deeply concerned about the loss of intellectual property. Beijing does not want merely to catch up to German companies—its goal is to surpass them. It has already done so in the manufacture of solar panels, by subsidizing research into solar technology. China exports perhaps 70 percent of its output of solar panels, about half of which goes to Germany, where demand is heavily subsidized by the German government. In electricity generation, Beijing invited Western companies to build power plants jointly with domestic Chinese partners. Now the Chinese are upgrading the plants with their own technology, based on what they learned through the German company Siemens and the French company Alstom.

A 2010 study by James McGregor of APCO sharply criticizing Chinese industrial and technology policies provides additional examples of China’s determination to leverage Western technology. Notably, China is expected to spend $730 billion on its rail network by 2020, with about half being used to expand high-speed passenger lines. This level of capital spending is irresistible for European producers. The China National Railway Corporation (CNR) invited Siemens to bid on a $919 million contract to build 60 passenger trains for service between Beijing and Tianjin. Siemens built the first three, but the remaining 57 were built in China by CNR, using 1,000 Chinese technicians Siemens had trained. In March 2009, Siemens announced an agreement for it to build 100 additional high-speed trains to serve Beijing-Shanghai, but China denied such an agreement ever existed. Siemens ultimately received a contract for $1 billion in components, but $5.7 billion went to CNR, which built the trains.

In the long run, China favors its own producers. It brings in foreign companies at the launching of an industry, then uses government procurement to advance the market share of Chinese companies and, eventually, to shut out competition. This strategy has allowed it to build on foreign companies’ expertise, develop domestic champions and raise the technological level of its economy and exports. Because of its large and rapidly growing market, China can pressure foreign companies to partner with Chinese companies, allowing their employees to learn managerial and technical skills. Over time, China has somewhat loosened formal requirements for foreign companies to accept partners, but the strategy of technology and skills transfer remains very much in force.

Developing countries naturally learn from best practices world-wide; indeed the 19th century economic history of the United States includes considerable technology transfer from Britain and the rest of Europe. Nevertheless, companies that have invested heavily to develop new technologies and efficient processes cannot afford to simply allow China to free-ride on their efforts. Yet many Chinese leaders make it clear they are on a mission to acquire the best technology, using their size and growth as a way to obtain it.

A December 23, 2010 New York Times editorial noted this strategy, saying, “[I]ntellectual property misappropriation cannot be a government policy goal, especially in a country the size of China, which can flood world markets with ill-begotten high tech products.” The editorial acknowledged some U.S. progress at the World Trade Organization, but urged our government to be “more vigilant and aggressive” against intellectual property losses.

Helping U.S. Manufacturers Adjust to China

U.S. exports of manufactured goods reached $952 billion in 2009 and grew strongly in 2010. The goal of increasing exports substantially is feasible, given favorable economic conditions and policies. It may even be possible to bring some off-shored production back to the United States, a possibility some manufacturers have been exploring, in order to remediate cost, quality and delivery problems. But first, policymakers must recognize that:

1. Today’s trade deficit is not a technology problem. The U.S. economy simply must become a more attractive place to develop and manufacture new products. The best ways to do this are to balance the budget and lower the marginal tax rate on corporations. Our trade problem is that U.S. companies develop innovative products but choose not to manufacture much of their value here. One chronic reason is that the value of a dollar has been too high, making U.S. production too expensive. If the U.S. saved more and balanced the federal budget, that problem would take care of itself. This would require global exchange rate adjustments including an increase in the real exchange rate of the renminbi, although economic forces will force this to happen without the need for U.S. political action. In addition, the U.S. corporate tax rate is higher than that of other countries, encouraging overseas investments. Both of the recently announced deficit reduction plans provide blueprints for balancing the budget and lowering corporate tax rates.
    
2. Technology may become a problem in the future. The United States should work with the European Union, Japan and multinational companies to develop a uniform code of conduct to protect technology and patents when emerging market companies work with multinationals. Government sanctions that would draw the United States into direct conflict with China are inadvisable, and the World Trade Organization (WTO) has limited effectiveness. Thus, multinational corporations should take the lead and refuse to work with foreign entities that demand access to and misuse proprietary technology. They should be fully informed of past unacceptable practices and the policies and behavior they should expect before entering new markets. If companies nevertheless reveal their technology as the price of market access, that is their choice.
    
3. Policymakers must work with the private sector to identify and reduce barriers to U.S. exports. The expansion of U.S. exports will be in industries such as advanced manufacturing, electronics, aerospace and medical devices. These industries will require new technologies, capital, R&D and skilled labor. There is a strong case for support of technology development through direct funding, improved tax treatment of R&D, increased access to capital and a reduced marginal corporate tax rate. Skill shortages appear to be another important barrier to expansion. Improving the U.S. education and training system in science, math, engineering and technology is a long-term national priority. Furthermore, as recommended by Brookings vice president Darrell West, easing restrictions on H-1B visas to prioritize high-value immigrants with technology expertise is an obvious policy fix with immediate benefits.
    
4. The policy debate must focus on the right issue, and not be drawn down blind alleys. Indicators that the U.S. economy is falling behind must be evaluated carefully. For example, A 2007 National Academy of Sciences study, Rising Above the Gathering Storm, reviewed a range of such indicators. It noted that China is building 50 chemical plants, whereas the United States is building one; and computer chip fabrication plants are being built in China (and elsewhere in Asia), but not in the United States. However, the lack of U.S. investment in these sectors may not be a reason for concern. It can be difficult to operate either bulk petrochemical or chip fabrication plants profitably over the long run, and they create few jobs.
    
5. Companies should focus on innovation and cost reduction and avoid dragging policymakers and themselves along time-wasting tangents. Endless discussions took place during the Clinton administration about how Fuji was competing unfairly with Kodak, whereas the real challenge to Kodak was not Fuji but digital technology. Currently, the World Trade Organization is assessing appeals from the European Union (EU) and the United States regarding its decision that the EU unfairly subsidized Airbus to the detriment of Boeing. Whatever the merits of the arguments in the parties’ six years of legal wrangling over this issue, Boeing’s future success may depend more on how well it solves problems with the new 787, now several years behind schedule, and whether it can make its factories leaner and more productive.

Conclusion

Expanding manufactured exports is a key to our nation’s global competitiveness and reduced trade deficits. Recovery in manufacturing will help employment and the revival of local economies. Competition from emerging economies, especially China, means that innovation in products and processes will be essential to maintaining U.S. leadership. While emerging economies are important markets for U.S. manufacturers, these exchanges should not become opportunities to misappropriate U.S. companies’ intellectual property. U.S. policymakers must create a climate that fosters growth in manufacturing while protecting U.S. innovation and technology.

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Introduction

Ohio has already taken important steps to address the state’s ongoing foreclosure crisis, yet the crisis continues, causing distress for thousands of families and individuals, and destabilizing cities, towns and neighborhoods across the state. Therefore, the state, its local governments and private stakeholders need to do still more to deal more effectively with the crisis and its impacts on the state’s housing stock, cities and neighborhoods.

What is often termed the “foreclosure crisis” is actually a multi-dimensional crisis, in which the collapse of the housing bubble, the devastation caused by the lax and often irresponsible credit practices that accompanied and perpetuated that bubble, the resulting freeze on commercial and consumer credit, and the worldwide recession are interwoven, and can only with great difficulty be untangled. In Ohio, those forces are further exacerbated by profound changes to the state’s historical economic underpinnings. Ohio cannot solve the crisis by itself, but it can significantly mitigate its impact on people, neighborhoods, and towns and cities. These mitigating efforts will also help preserve the value of homes and neighborhoods in the state, and place Ohio in a stronger position to benefit from the future economic recovery.

The paper begins with a short summary of current conditions and the actions the state has already taken to address the wave of foreclosures, followed by a discussion of areas for future action. This discussion will address mitigating both the individual and community impacts of foreclosure, but will give particular emphasis to the critical issue of softening the blow of foreclosure on communities, which up to now has been less of a focus for state action.

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Executive Summary

The move to the cloud is one of the defining information technology trends of the early 21st century. By providing businesses, universities, government agencies, and other entities with access to shared and often physically dispersed computing resources, cloud computing can simultaneously offer increased flexibility, reduced cost, and access to a wider array of services.

Cloud computing has also created a set of new challenges. For example, the issues of privacy and security in the cloud are well recognized and have been extensively discussed in the business and popular press. However, one critical issue that has received very little attention with respect to cloud computing is export control.

In the broadest sense, export control relates to regulations that the United States and many other countries have put in place to restrict the export of various sensitive items, information, and software.

There is an inherent tension between cloud computing and export control. While the concept of the cloud is centered on the premise of removing the need to track the details of data movement among various destinations, export control regulations are built largely around restrictions tied to those very movements.

If cloud computing is to reach its full potential, it is critical for providers and users of cloud services to address its implications with respect to export control. It is equally important to adapt the export control regulations to reflect the increasing prevalence of cloud computing in a manner that preserves the ability of American companies to benefit from the efficiencies of the cloud while also ensuring that American national security and foreign policy interests are adequately protected.

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